NEW YORK (TheStreet) -- Walmart Stores (WMT) on Monday announced its latest initiative to try and compete with online behemoth Amazon.com (AMZN). Walmart is rolling out a personalized shopping feature for its website that will enable it to tailor its home page to each customer. Local weather and events will be highlighted as well as customer searches and purchase history.
Much like the Amazon's customized service, the new offering from Walmart would recommend diapers and cribs for a new mom who recently purchased a baby stroller. If someone living in Dallas searches for a sports jersey Walmart.com would recommend Cowboy gear.
Walmart is planning a complete re-launch of its Web site in 2015 and this is the beginning of many new changes coming to their online site. Walmart is in the process of refocusing its attention back to online given the challenges it is experiencing in the discount sector. The online division of Walmart has seen sales grow 27% to $10 billion in the last year. This is still a tiny portion of its $477 billion annual revenue and a fraction of the $80 billion annual Amazon generates. However, with its main discount division suffering five straight quarters of decline, Walmart sees tremendous upside potential online.
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Walmart may be late to the game or it may be focusing towards online at the perfect time. @WalmartLabs is the tech division of Walmart's e-commerce division. Last week the division made its 14th purchase since 2011, gobbling up Luvocracy, a three-year-old firm and an online community of half a million members that allows consumers to discover and buy products recommended by other people, from their own friends and family to bloggers and other influencers.
"Luvocracy was one of the first companies to enable the entire social shopping experience -- from discovery to commerce -- to occur within the four walls of its app," Ben Galbraith, vice president of global products for @WalmartLabs, said in a blog post on the day of the acquisition. Not only could members make suggestions on goods, users also could buy products directly from the site.
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Walmart does have one advantage over Amazon -- its large retail presence throughout the U.S. Its site-to-store program offering free shipping has been instrumental in its sales growth over the last two years. The ability to offer free shipping or in-store pick-ups as well as local sales is a distinct advantage Wal-Mart has not properly focused on till now.
Amazon saw its stock price hit hard after reporting earnings a week ago when it forecast continuing loses due to fulfillment center expansion. In this respect Wal-Mart is ahead of Amazon as its infrastructure is already in place. If Wal-Mart can move quicker into online while Wall Street sees Amazon as weakened, the company could reap huge gains. Shipping costs are eating into Amazon's profits and with Walmart prices perceived as lower than most in the discount store format, the more it focuses online with this consumer perception the bigger its growth can be .
Walmart reports earnings on Aug. 14. Estimates call for $1.15 to $1.25 earnings per share compared to $1.24 last year.
At the time of publication the author held no positions in any of the stocks mentioned.
This article represents the opinion of a contributor and not necessarily that of TheStreet or its editorial staff.
TheStreet Ratings team rates WAL-MART STORES INC as a Buy with a ratings score of B+. TheStreet Ratings Team has this to say about their recommendation:
"We rate WAL-MART STORES INC (WMT) a BUY. This is driven by several positive factors, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its revenue growth, good cash flow from operations, reasonable valuation levels and notable return on equity. We feel these strengths outweigh the fact that the company has had lackluster performance in the stock itself."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- WMT's revenue growth has slightly outpaced the industry average of 4.3%. Since the same quarter one year prior, revenues slightly increased by 0.8%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
- Net operating cash flow has increased to $5,939.00 million or 21.35% when compared to the same quarter last year. In addition, WAL-MART STORES INC has also modestly surpassed the industry average cash flow growth rate of 13.84%.
- WAL-MART STORES INC' earnings per share from the most recent quarter came in slightly below the year earlier quarter. The company has suffered a declining pattern of earnings per share over the past year. However, we anticipate this trend reversing over the coming year. During the past fiscal year, WAL-MART STORES INC reported lower earnings of $4.86 versus $5.01 in the prior year. This year, the market expects an improvement in earnings ($5.16 versus $4.86).
- The company's current return on equity has slightly decreased from the same quarter one year prior. This implies a minor weakness in the organization. Compared to other companies in the Food & Staples Retailing industry and the overall market, WAL-MART STORES INC's return on equity exceeds that of both the industry average and the S&P 500.
- You can view the full analysis from the report here: WMT Ratings Report